Cleveland-based KeyCorp is riding a wave of expansion in Utah, thanks in part to an economy that appears to be weathering the nation's economic storm.
Henry Meyer, chairman and chief executive officer of KeyCorp, visited Salt Lake on Thursday, praising Utah's low unemployment rate and strong economy.
That's part of the reason the company is opening six news banking centers throughout the state. The new centers will be located in Orem, Draper, West Jordan, Sandy, Park City and West Valley.
"We are one of the few bank-based financial services companies that is opening branches. Our private banking (in Utah) ranked No. 1 of all our 26 (districts) for the first six months of 2001," said Meyer.
An Ohio resident, Meyer said the recent economic downturn is more evident in the Midwest where manufacturing, steel and auto productions are in a slump.
"That has left some of our Rocky Mountain entities, specifically Denver and Salt Lake City, performing in the very top of the industry," Meyer said. "It feels like a recession in Ohio. It doesn't feel like a recession here."
Doug Black, president of KeyBank's Utah district, said Utah's economy remains steady.
"In Utah you never really see the big ups, but you also never really see the big downs," Black said. "I can't imagine that there is anything that is going to drive a dramatic downturn here."
In fact, the state has enjoyed uninterrupted employment growth since the mid 1960s. And, the unemployment rate remains historically low at 3.6 percent, nearly a full point below the national average.
"We are hopeful that Utah will hang in there, that the Rockies and Northwest aren't going to be just time-delayed duplicates of what we have seen in the Midwest," Meyer said, predicting that second-quarter gross domestic product will be close to zero and that regionally the Midwest will show negative growth.
The economic malaise means more borrowing by corporate customers, Meyer said. However, less reserves by corporate customers translates into higher nonperforming loans.
"In our second-quarter numbers, we had an $84 million increase in our nonperformers. Almost all of it was corporate as opposed to consumer. And that's what happens in a recession. Companies can't operate," Meyer said.
Meyer indicated that higher numbers of nonperforming loans would likely continue through the third quarter because of a lag in delinquencies.
"We are not sure when the turn will be. We hope it will be fourth (quarter). It might be first. But we think that there is a high probability that it is one of those two quarters," he said.
Dave Proko, a bank analyst for Weiss Ratings, a Florida-based bank rating agency, said KeyBank had $21.4 million in nonperforming loans as of March 2001, a 48 percent increase over first quarter 2000.
Despite the steep rise, the agency upgraded its rating of KeyBank from fourth quarter 2000 to this year's first quarter, from a "B-" to a "B," because of its increase in core capital and reserves.
Despite record profits by banks in first quarter 2001, Proko said nonperforming loans continue to be the chief concern in the banking industry.